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Corporate Finance · End Term · 13 Apr 2025 · January 2025 term

Question 20: Suppose that in the Black-Scholes pricing formula for a …

Question 20

+3 marksOne correct option

Suppose that in the Black-Scholes pricing formula for a put option, we have N(d1)=0.4 and N(d2)=0.7. If the stock price increases by Rs 1, then what will be the change in the price of the put option?

  1. A

    The put option price increases by Rs 1.

  2. B

    The put option price increases by Rs 0.6.

  3. C

    The put option price decreases by Rs 0.6.

  4. D

    The put option price decreases by Rs 0.4.

Show answer

Correct answer

  • C

    The put option price decreases by Rs 0.6.

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Question 20 of 35 in the IIT Madras BS Corporate Finance (Corporate Finance) End Term paper sat on 13 Apr 2025, in the January 2025 term (IIT M IMPROVEMENT AN EXAM QIM3 13 Apr 2025). It carries 3 marks.

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